Do You Have a Looming Claim Situation?

If your buyer becomes insolvent, or is late in paying your invoice, do you know what to do and when to do it? If you think you may need to file a claim under your Ex-Im Bank insurance policy, call us early - we can help! Three things that will be important are: 1) reporting your buyer as past due; 2) understanding the process and timeline for filing a claim; and 3) assembling all of the necessary documentation required to support the claim.

Top reasons claims are denied reflect the importance of these issues:

• Late claim filings
• Failure to stop shipping; "shipping into defaults"
• Lack of proof of export; proper documentation
• Shipments not reported / unpaid premiums - click here for more info
• Violation of Discretionary Credit Limits (DCLs) - click here for more info
• Unresolved disputes - typically outside of the exporter's control

Reporting Past Due Invoices

When is an invoice considered past due? Ex-Im Bank considers an invoice as "past due" if it remains unpaid ≥90 days after the due date on the original invoice. If you give your buyer 90 day open account terms, past due means unpaid at 180 days after the invoice date (90 days after the due date). If there are multiple due dates / installment payments on the invoice, the buyer is considered past due if they are late in making any one of the scheduled payments by 90 days or more.

You have certain responsibilities when your buyer is past due. In order to remain in compliance with your policy and maintain your ability to get paid in a claim situation, YOU MUST

• Report all invoices of $25,000 or more at 90 days past due in Ex-Im Online (EOL)
• STOP SHIPPING to that buyer if even one invoice reaches more than 90 days past due!
• DO NOT reschedule the payment terms at any time after shipment
• Apply payments to oldest invoices first
• Continue to update the past due report in EOL until your buyer has paid in full or you file a claim.

*Reporting overdue invoices is only a "heads-up" to Ex-Im that a claim may be filed and shows Ex-Im that you are actively managing your policy. There is no charge to the exporter, and no immediate action will be taken.

Filing a Claim

The majority of claims paid by Ex-Im Bank in 2012 were related to short-term credit insurance policies. However, just because you make a claim, doesn't mean it will be paid (or even paid in full). Once submitted, Ex-Im's claims officer will review your transaction documents against your specific policy requirements to determine the "Eligible Loss" amount. Each policy text includes language on what constitutes a valid claim and your responsibilities as the insured:

• The claim must be related to a valid shipment - your shipment is an insured transaction only if it meets all of the conditions set forth in Article 3 of the policy text on the date of shipment.
• The related shipment must have been reported in EOL and the premium paid on time.
• The claim must be made within the claim filing window which opens at 90 days past due and closes at 240 days past due (with NO Exceptions!).
• The claim must be properly documented and supported.
• All claims to Ex-Im Bank are now made via the online system (EOL).

Maintaining Proper Documentation

Ex-Im Bank recommends that exporters should "assume and document as though there will be a claim even when exporters are confident in repayment." In case you need to file a claim, you must maintain in your files (or have access to) all documents to be presented to Ex-Im Bank in event of a claim.

Documentation should include, at minimum: evidence that the buyer's credit limit was approved including ledger history if applicable, a copy of a signed pro-forma invoice or purchase order, commercial invoice, evidence of exportation via an independent third-party transport document, and a letter or notice demanding payment from the buyer if you have not received payment by 90 days from the invoice due date. Click here for our Claim Filing Document Checklist.

This and further information is detailed in all standard Ex-Im short-term multi-buyer export credit insurance policies. Click here to view Ex-Im's policy text, and pay particular attention to:

• ARTICLE 3. - REQUIREMENTS OF AN INSURED TRANSACTION
  Please Note: ARTICLE 3, Section E. 1-3 of your policy document describes the requirements of evidence of export via shipping documents and/or accompanying written instructions for delivery. This includes special notes regarding shipments to Mexico and Canada.
• ARTICLE 6. - AGREEMENTS OF THE INSURED
• ARTICLE 7. - PROOF AND PAYMENT OF CLAIMS

As your broker, we are here to help. We will gladly review the details of your policy with you. We can also provide training on the online policy management tools, show you where your policy discusses these issues, and make sure that you have the best coverage to suit your business needs. Contact Us today!